From Arts and Letters Daily comes this link to R. Epstein in Reason, who justifies the state on the following grounds:“successful cooperation in key situations can be thwarted by individual holdouts. It will not be possible to build a railroad from point A to point B solely by getting the cooperation of 99 out of 100 private landowners along the way. The last one (indeed all) must be brought into line, and the way to do it is to compel the purchase by paying them the highest value of the land in any alternative use whose value is not dependent on the railroad that is about to be built. The public, including those whose property is condemned, gain the benefit of the railroad, but if compensation is correctly calculated — a big if — no individual suffers financial deprivation in the process. State coercion is used to create the win/win situations found in private contracts. What works in condemnation cases helps explain taxation as well.”
As Walter Block (1 and 2) argues, the holdouts are precisely the people that private-property advocates ought to be defending, not denigrating. “For holdouts are private-property owners, going about their business, refusing to sell to developers. In any case, there are many ways to deal with holdouts.” Perhaps Professor Block can be persuaded to write an entire article on the topic.
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“It will not be possible to build a pipeline for oil from point A to point B solely by getting the cooperation of 9 out of 10 governments along the way. The last one (indeed all) must be brought into line, and the way to do it is to compel the purchase by paying them the highest value of the land in any alternative use whose value is not dependent on the pipeline that is about to be built. The public, including those whose property is condemned, gain the benefit of the pipeline, but if compensation is correctly calculated — a big if — no individual country suffers financial deprivation in the process. United States coercion is used to create the win/win situations found in private contracts. What works in condemnation cases helps explain taxation as well.”
In general, the way to handle the pipeline routing problem is for the pipeline company to lay out several alternate routes and then purchase options on parcels along each route. Since no parcel owner knows if he’s the last parcel, he can’t be a holdout. His incentives are to truly consider what the property is worth, which could be infinite in that no price will induce him to sell. Unless there is such a parcel owner on every possible route, the pipeline company will be able to put together options on the lowest-cost route so the pipeline, if economic, can be built.
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